Krugman VS the market

[piasabird]

Just look at california as a model. They are raising taxes and jobs are fleeing to cheaper states. Or better yet look at all the jobs that have been created in Illinois. No one wants to build a manufacturing or service supply company in a state that will demand more in taxes. While all this is going on, some states are trying to do away with income tax in favor of a sales tax around 3%. One reason I like the concept of a sales tax is that there are no exceptions, if you buy something, you have to pay the tax. That way everyone is taxed at the same rate on the state level. Missouri is now considering this.

 

[fskimospy]

WTF? Record spending and deficit with debt in excess of GDP is AUSTERITY? So evidently "normal" spending would be new debt of maybe half of GDP every year and "stimulus" would be borrow and spend last year's GDP every year until the economy is "fixed"?

Austerity is the reduction of government spending (EDIT: and/or deficits), it is not some arbitrary level that once reached constitutes 'austerity'. The cutting of government spending across the industrialized world has had the exact effect that was predicted, bad news for everyone involved.

I'm sure the answer will be that if we just cut more, THEN we would see a magical explosion of growth. But that's a pretty standard argument, conservatism can never fail... it can only be failed.

 

[Craig234]

Anemic job growth? Maybe you and Krugman didn't pay attention to the 4.6% unemployment rate in 2006 AND 2007? But hey I am sure you guys will find some way to say that got nothing to do with tax cut.

I will be the first to admit Bush's tax cut is not the only reason for the low unemployment rate during 2006~2007. But at least I won't simply dismiss it just because it doesn't fit my agenda.

No, you will dismiss the fact that the Bush tax cuts had little to do with helping employment because that fits your agenda.

As I recall, Krugman actually favored *a* tax cut to help the economy at the time - his objection was to weighting it for the rich as Bush did.

But we'll let Krugman answer the issue of the borrowed cuts and unemployment:

http://krugman.blogs.nytimes.com/2008/01/14/bush-tax-cut-mythology/

As it shows, the first cut was followed by higher unemployment, and the second, he explains, was followed by a drop in unemployment from the housing bubble.

But hey, let's compare the two parties' last president and ask who did jobs better:

So, you go ahead and keep twisting the facts. You say you are for lower unemployment; now look at the Clinton years chart, and you pick Republicans.

That's not 'proof' Democrats are better (but they are statistically far better over the last century), but you are for Republicans by twisting the facts.

 

[Craig234]

Just look at california as a model. They are raising taxes and jobs are fleeing to cheaper states. Or better yet look at all the jobs that have been created in Illinois. No one wants to build a manufacturing or service supply company in a state that will demand more in taxes. While all this is going on, some states are trying to do away with income tax in favor of a sales tax around 3%. One reason I like the concept of a sales tax is that there are no exceptions, if you buy something, you have to pay the tax. That way everyone is taxed at the same rate on the state level. Missouri is now considering this.

California is doing better than you say, and doing better now that the state can pass a budget with a majority vote (now we need taxes set by a majority).

Cheap jobs go to cheap states. Texas has huge job growth, and the highest percent of jobs at minimum wage (workers should thank liberals and unions for there being one) and the lowest percent of people with medical insurance. So, great, let's copy them - and have a lot poorer workers. Hey, why not just copy China's wages?

In fact, let's pay people 10% as much as China. Just think of the low unemployment when our workers are building the world's junk!

 

[theeedude]

No, you will dismiss the fact that the Bush tax cuts had little to do with helping employment because that fits your agenda.

As I recall, Krugman actually favored *a* tax cut to help the economy at the time - his objection was to weighting it for the rich as Bush did.

But we'll let Krugman answer the issue of the borrowed cuts and unemployment:

http://krugman.blogs.nytimes.com/2008/01/14/bush-tax-cut-mythology/

As it shows, the first cut was followed by higher unemployment, and the second, he explains, was followed by a drop in unemployment from the housing bubble.

But hey, let's compare the two parties' last president and ask who did jobs better:

So, you go ahead and keep twisting the facts. You say you are for lower unemployment; now look at the Clinton years chart, and you pick Republicans.

That's not 'proof' Democrats are better (but they are statistically far better over the last century), but you are for Republicans by twisting the facts.

You are wasting time on rightwing dummies. They don't care about their ideology fitting reality, they'd rather distort their perception of reality to fit their ideology. That's why they both stimulate and cut at the wrong time.

 

[werepossum]

Austerity is the reduction of government spending (EDIT: and/or deficits), it is not some arbitrary level that once reached constitutes 'austerity'. The cutting of government spending across the industrialized world has had the exact effect that was predicted, bad news for everyone involved.

I'm sure the answer will be that if we just cut more, THEN we would see a magical explosion of growth. But that's a pretty standard argument, conservatism can never fail... it can only be failed.

US government has not been cut. Under Obama, it has been increased even more quickly than under Bush. The only thing you can claim is that it should have grown even more quickly than the record rates at which it did grow. Hard to call that austerity with a straight face, I'd say.

 

[woolfe9999]

Just look at california as a model. They are raising taxes and jobs are fleeing to cheaper states. Or better yet look at all the jobs that have been created in Illinois. No one wants to build a manufacturing or service supply company in a state that will demand more in taxes. While all this is going on, some states are trying to do away with income tax in favor of a sales tax around 3%. One reason I like the concept of a sales tax is that there are no exceptions, if you buy something, you have to pay the tax. That way everyone is taxed at the same rate on the state level. Missouri is now considering this.

I don't know how any state, even those which offer fewer services and regulate less, can get by on a 3% sales tax without any income tax. Maybe with very high property taxes. Of course, states like Nevada and Alaska are exceptions for reasons particular to those states.

I personally dislike sales taxes and think they should be done away with. Not only are they regressive, but they discourage consumer spending which is the engine of our economy. The single worst thing we could do is replace the federal income tax with a national sales tax.

 

[fskimospy]

US government has not been cut. Under Obama, it has been increased even more quickly than under Bush. The only thing you can claim is that it should have grown even more quickly than the record rates at which it did grow. Hard to call that austerity with a straight face, I'd say.

Effectively, austerity policies have been implemented by the US since the end of the first quarter this year. Off hand, totally unrelated question: when did job growth in the US disappear, anyway?

Just a coincidence, I'm sure.

 

[momeNt]

Tax cuts during slow growth periods obviously wouldn't lead to job growth and be an effective stimulus, the entire reason that growth is slowing is that people no longer wish to invest in the present (consume) and will instead prefer to invest in the future (save). Monetary policy attempt to alter the masses preference for savings over consumption and in many cases it is not enough so they enter the paradox of Keynesian stimulus "liquidity trap", the answer then comes in the form of even larger fiscal stimulus in the form of government debt or taxing the savers.

This raises the question about Krugman and the rest of Keynesians, why is the goal to alter the natural preference of people with regards to savings / consumption? All that happens is the stimulus spurs consumption over savings, and when that runs out you enter the same slump you were in before. I feel that this constant fine tuning and panics caused by the disequilibrium of savings/consumption could all just be avoided if we stopped trying to fuck with it.

 

[fskimospy]

Tax cuts during slow growth periods obviously wouldn't lead to job growth and be an effective stimulus, the entire reason that growth is slowing is that people no longer wish to invest in the present (consume) and will instead prefer to invest in the future (save). Monetary policy attempt to alter the masses preference for savings over consumption and in many cases it is not enough so they enter the paradox of Keynesian stimulus "liquidity" trap, the answer then comes in the form of even larger fiscal stimulus in the form of government debt or taxing the savers.

This raises the question about Krugman and the rest of Keynesians, why is the goal to alter the natural preference of people with regards to savings / consumption? All that happens is the stimulus spurs consumption over savings, and when that runs out you enter the same slump you were in before. I feel that this constant fine tuning and panics caused by the disequilibrium of savings/consumption could all just be avoided if we stopped trying to fuck with it.

Except of course that the rate and severity of financial panics on the whole has markedly decreased since we started 'fucking with' monetary policy.

Then again, you believe in Flintstone Phone economics, which is probably why this is so baffling to you.

 

[Genx87]

Anemic job growth, yes. Krugman was paying attention to the actual situation, if only more people had listened to him, huh?

http://www.nationaljournal.com/magazine/what-happened-to-15-million-u-s-jobs--20110121

Read this and weep. No seriously, it should make you really sad... it makes me sad. (and seriously, read the whole thing, it's worth it)

This article makes a point and is informative. But it doesnt answer why people stopped working. It makes assumptions but clearly something happened in the 2000's that caused people to stop seeking jobs in raw numbers compared to previous decades. Which kept the unemployment rate low but didnt see jobs created. Perhaps this last decade was a hangover from the 1990s where many middle class people accumulated a lot of wealth which allowed them to retire early. Or we are starting to feel the effects of a population bubble(baby boomers) coming of retirement age. It could also be a shift in values. Women returning to the home instead of the work grind and raising a family. We had projections but if people dont feel the need to work. I wouldnt consider that bad. Unless of course, they are becoming wards of the state.

 

[fskimospy]

This article makes a point and is informative. But it doesnt answer why people stopped working. It makes assumptions but clearly something happened in the 2000's that caused people to stop seeking jobs in raw numbers compared to previous decades. Which kept the unemployment rate low but didnt see jobs created. Perhaps this last decade was a hangover from the 1990s where many middle class people accumulated a lot of wealth which allowed them to retire early. Or we are starting to feel the effects of a population bubble(baby boomers) coming of retirement age. It could also be a shift in values. Women returning to the home instead of the work grind and raising a family. We had projections but if people dont feel the need to work. I wouldnt consider that bad. Unless of course, they are becoming wards of the state.

The Bush tax cuts were touted as being put in place to create large numbers of jobs, and that is clearly something that didn't happen for whatever reason. Krugman predicted that the cuts would be ineffective at driving job creation. While there could be other explanations for this poor performance, from the evidence available I think Krugman's prediction is looking pretty good.

 

[momeNt]

Except of course that the rate and severity of financial panics on the whole has markedly decreased since we started 'fucking with' monetary policy.

Then again, you believe in Flintstone Phone economics, which is probably why this is so baffling to you.

Except this most recent one heh.

It will be exciting to see what happens in Europe. It also will be exciting when we become China's colony because they are able to keep their currency depressed better than we are able to keep racking up debt to try and get them to experience some inflation.

 

[Genx87]

The Bush tax cuts were touted as being put in place to create large numbers of jobs, and that is clearly something that didn't happen for whatever reason. Krugman predicted that the cuts would be ineffective at driving job creation. While there could be other explanations for this poor performance, from the evidence available I think Krugman's prediction is looking pretty good.

It obviously helped create as many jobs as the job market(job seekers) demanded. What else do you want it to do? The 14 trillion dollar question is why didnt the job seekers seek employment in raw numbers like we have seen in previous decades?

My point is the argument bush tax cuts and his deficit spending was bad because it didnt create as many jobs as expected while Obama's is good while creating even less jobs is silly. The rate of unemployment for Bush peaked at sub 5%. That is full employment. You cant create many more jobs if you are hitting unemployment numbers like that. And from your article it is clear people were not in the job market. And like I said, that isnt the worst thing unless they became wards of the state.

If we were humming along at 9.1% unemployment for the decade and created that little jobs. I would be worried. But we didnt, jobs were basically created at the rate the market needed it.

As for Krugmans prediction. Who cares? Unless he can answer why this last decade more people decided to stop seeking employment. He guessed right for the wrong reasons.

 

[theeedude]

It obviously helped create as many jobs as the job market(job seekers) demanded. What else do you want it to do? The 14 trillion dollar question is why didnt the job seekers seek employment in raw numbers like we have seen in previous decades?

My point is the argument bush tax cuts and his deficit spending was bad because it didnt create as many jobs as expected while Obama's is good while creating even less jobs is silly. The rate of unemployment for Bush peaked at sub 5%. That is full employment. You cant create many more jobs if you are hitting unemployment numbers like that. And from your article it is clear people were not in the job market. And like I said, that isnt the worst thing unless they became wards of the state.

If we were humming along at 9.1% unemployment for the decade and created that little jobs. I would be worried. But we didnt, jobs were basically created at the rate the market needed it.

As for Krugmans prediction. Who cares? Unless he can answer why this last decade more people decided to stop seeking employment. He guessed right for the wrong reasons.

You smoking something?

 

[fskimospy]

It obviously helped create as many jobs as the job market(job seekers) demanded. What else do you want it to do? The 14 trillion dollar question is why didnt the job seekers seek employment in raw numbers like we have seen in previous decades?

My point is the argument bush tax cuts and his deficit spending was bad because it didnt create as many jobs as expected while Obama's is good while creating even less jobs is silly. The rate of unemployment for Bush peaked at sub 5%. That is full employment. You cant create many more jobs if you are hitting unemployment numbers like that. And from your article it is clear people were not in the job market. And like I said, that isnt the worst thing unless they became wards of the state.

If we were humming along at 9.1% unemployment for the decade and created that little jobs. I would be worried. But we didnt, jobs were basically created at the rate the market needed it.

As for Krugmans prediction. Who cares? Unless he can answer why this last decade more people decided to stop seeking employment. He guessed right for the wrong reasons.

That's specious reasoning. The current unemployment rate is lower than usual because people have exited the job market as well, that doesn't mean that they wouldn't like to be part of it in different circumstances, and the idea that lower unemployment due to people leaving the workforce as a good measure of success certainly raises my eyebrows. On what are you basing your idea that the cuts 'helped' anything?

If the US's employment picture was already so rosy, ratcheting up deficits to improve an already perfect employment picture is just bad policymaking. If the situation was good, they were unnecessary and a needless burden on the deficit. If the situation was bad as the poor job growth numbers indicate to me, they were ineffective. On what metrics are you saying that Obama's initiatives have been ineffective at creating jobs? Most nonpartisan analysis has credited them with somewhere between 1.5-3 million jobs. (that would be more than the US grew in employment for the entirety of Bush's presidency, btw) The argument is that tax cuts are a bad way to reduce unemployment, and the evidence for this is pretty strong.

You're supposed to diminish deficits in good economic times and increase them in bad times, that's Keynesianism 101. The fact that Krugman was against Bush running up deficits when the economy was functioning okay isn't some hypocrisy or inconsistency, it's basic Keynes that's been around for almost a century now.

 

[Genx87]

You smoking something?

You have any idea what the word "peaked" means when talked about unemployment numbers?

http://data.bls.gov/timeseries/LNS14000000

Note from Aug 2005 until April 2008 we were for the most part under 5%.

 

[Genx87]

That's specious reasoning. The current unemployment rate is lower than usual because people have exited the job market as well, that doesn't mean that they wouldn't like to be part of it in different circumstances, and the idea that lower unemployment due to people leaving the workforce as a good measure of success certainly raises my eyebrows. On what are you basing your idea that the cuts 'helped' anything?

If they wanted to be "part" of the employment market. They would be looking for a job. While there may be people who simply gave up. What you are suggesting is 15 million people gave up if you believed the estimates. That is absurd and not based in reality.

Why they stopped looking is the key to this discussion. Nobody truely knows why and your article doesnt either.

If the US's employment picture was already so rosy, ratcheting up deficits to improve an already perfect employment picture is just bad policymaking. If the situation was good, they were unnecessary and a needless burden on the deficit. If the situation was bad as the poor job growth numbers indicate to me, they were ineffective. On what metrics are you saying that Obama's initiatives have been ineffective at creating jobs? Most nonpartisan analysis has credited them with somewhere between 1.5-3 million jobs. (that would be more than the US grew in employment for the entirety of Bush's presidency, btw) The argument is that tax cuts are a bad way to reduce unemployment, and the evidence for this is pretty strong.

You're supposed to diminish deficits in good economic times and increase them in bad times, that's Keynesianism 101. The fact that Krugman was against Bush running up deficits when the economy was functioning okay isn't some hypocrisy or inconsistency, it's basic Keynes that's been around for almost a century now.

At the time of Bush's proposed cuts unemployment was over 6%. It certainly wasnt rosy. It sank to sub 5% by August of 2005 and remained there until April of 2008. What did our deficits look like on the back side of that drop of unemployment? Deficit spending peaked in 2003 at 5.2% of GDP, and dropped to 3.6% in 2007. In 08 the bottom dropped out completely. It appears Bush practiced what you preach. I find it interesting that you and Krugman complain about deficit spending when Bush does it. But nothing but praise when Obama does it.

 

[fskimospy]

If they wanted to be "part" of the employment market. They would be looking for a job. While there may be people who simply gave up. What you are suggesting is 15 million people gave up if you believed the estimates. That is absurd and not based in reality.

Why they stopped looking is the key to this discussion. Nobody truely knows why and your article doesnt either.



At the time of Bush's proposed cuts unemployment was over 6%. It certainly wasnt rosy. It sank to sub 5% by August of 2005 and remained there until April of 2008. What did our deficits look like on the back side of that drop of unemployment? Deficit spending peaked in 2003 at 5.2% of GDP, and dropped to 3.6% in 2007. In 08 the bottom dropped out completely. It appears Bush practiced what you preach. So why are and you and Krugman complaining about deficit spending when Bush does it, but praise when Obama does it?

No, Bush did that in no way, shape, or form. Do you really not see that?

First, as mentioned several times previously, tax cuts are ineffective fiscal stimulus for job creation. As already said, Krugman's primary complaint against them was that they weren't going to do what Bush said they were going to do. He was correct in this.

Second, If you look at what really happened from the Bush tax cuts you will see large increases in the deficit immediately after their passage. The US's fiscal situation under Bush began to deteriorate immediately upon his entry into office. The only reason the deficit picture looked better from 2005-2007 was that government tax receipts were fueled by a huge speculative real estate boom, and we all know the results of that. Why would we count a brief windfall that contributed to massive economic collapse as an example of good Keynesian economics? That wasn't Bush implementing deficit reduction policies, it was Bush sitting on a time bomb that exploded.

So once again, no. Bush grew deficits in good economic times and saw no job creation for his trouble. Deficits aren't either good or bad, they are necessary or unnecessary. They were unnecessary in the early-mid 2000's, and necessary now. Does that clear it up?

EDIT: Oh, and also it seems a bit strange for Bush to have taken a budget projected to be trillions in surplus, and then reduce it to trillions in future deficits as a sign that he was pursuing deficit reducing fiscal policies in good economic times.

 

[fskimospy]

If they wanted to be "part" of the employment market. They would be looking for a job. While there may be people who simply gave up. What you are suggesting is 15 million people gave up if you believed the estimates. That is absurd and not based in reality.

So the US not counting people who aren't looking for a job now is the correct way to measure unemployment? If they wanted to be part of the employment market they would be looking for a job, right?

Wages were also stagnant during the 2000's, which shows that employers were not having to fight harder in order to acquire or retain talent, which clearly indicates that the job market was not worker constrained. There's really no way to excuse the job creation data from the 2000s, it was dismal by every metric.

 

[Fern]

-snip-
I don't see Krugman, nor any comments so far, promising that the 10yr will stay at 2% indefinitely. That doesnt imply that it will rocket to some absurd and unmanageable level if a strong recovery took hold. Why would you assume that happen anyway? It will rise, but there is no solid evidence to say that it can't be covered by a growing economy, much increased revenues and a more normal inflation rate.

I've never said, nor implied, interest % on debt would rise to an absurd level, although I've lived long to have actually seen that. Damn, just googled, didn't realize how extremely the yield has fluctuated: http://www.multpl.com/interest-rate/

Figure $15-20 trillion in debt and then increase your average interest rate by a few percentage points and we're talking real money. Increase it to something in the upper range of possibility and it's ghastly expensive.

One problem I have with Krugman and his model is I believe he's ignoring the 'unforseen event' type thing; the 'perfect storm' thing. E.g., what if Europe and the rest of the world really get their economies going before us?

If that happens I fear a lot of money will be flowing out of Treasuries to higher yielding, yet safe, investments that would be expected to be available.

We would be in a very bad situation if interest costs rose a couple hundred billion or more while we were still in a slump running deficits.

I see Krugman's 'go big or go home' type of stimulus recommendation as an 'win or die' type bet. As a conservative I cannot agree to something that seems to carry such a high element of risk. From the general economic literature I've seen the model Krugman is relying on is thought to have dubious predictive value, yet that is what Krugman is doing. So, IMO, just far too risky for an all-out stim plan blowing up our debt even more.

Anyway, if this was the slam-dunk solution Krugman and his acolytes here claim I don't see how Greece got into the trouble it did. Greece got to the 100% level of debt to GDP and the poop hit the fan. Looks to me the only way to claim we're not at a similar level is to exclude our special SS bonds, and if anybody thinks that's not real debt that has to be paid they are crazy.

(I don't know if other countries play the 'special SS Treas Bond' game, or if they do why it should be excluded from 'public debt')

Fern

 

[bfdd]

Just look at california as a model. They are raising taxes and jobs are fleeing to cheaper states. Or better yet look at all the jobs that have been created in Illinois. No one wants to build a manufacturing or service supply company in a state that will demand more in taxes. While all this is going on, some states are trying to do away with income tax in favor of a sales tax around 3%. One reason I like the concept of a sales tax is that there are no exceptions, if you buy something, you have to pay the tax. That way everyone is taxed at the same rate on the state level. Missouri is now considering this.

It's not just taxes in California pushing them out. It's various other things that are like "taxes". Regulations are a form of taxation. Entrance to do business in California is incredibly high and it costs more in the long run as well. With our high cost of living, this is the stupidest shit ever. Fucking hippies are to blame for the most part. Douche bag fucks think the world runs on sunshine and farts.

 

[chucky2]

Not true. It also runs off exploited illegals backs that both sides import to artificially inflate their purchasing power...sort of a play now pay later type of deal...

 

[theeedude]

You have any idea what the word "peaked" means when talked about unemployment numbers?

http://data.bls.gov/timeseries/LNS14000000

Note from Aug 2005 until April 2008 we were for the most part under 5%.

You are confused about employment and unemployment, but in any case, Republicans passed two huge deficit busting tax cuts at a time of what you claim to be "full employment." But now that we have 9% unemployment, all of the sudden, we can't have more stimulus and need to focus on the deficits, even if it tanks the economy further. You guys are worse than a broken clock.

 

[werepossum]

Effectively, austerity policies have been implemented by the US since the end of the first quarter this year. Off hand, totally unrelated question: when did job growth in the US disappear, anyway?

Just a coincidence, I'm sure.

Austerity policies?

Here's Treasury's report showing government revenue, outlays, & deficit for fiscal years 2010 & 2011. Figure 1 on page 3 shows it well in graphic form.
http://www.fms.treas.gov/mts/mts0711.pdf

Note that in FY2010 the federal government spent $3,455,949,000,000 - that's an average of $287,955,750,000 a month. In the first ten months of FY2011 (what is available from Treasury) the federal government spent $2,992,997,000,000 - that's an average of $299,299,700,000 a month, or almost 4% more than last year.

Michael Mann-styled graphs aside, austerity is spending LESS, not LESS MORE.